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Central bank maintains key rate at 9.75%

Peter 14th May, 2025 Economy Pedson Mumbere
Central bank maintains key rate at 9.75%

BoU Governor Michael Atingi-Ego (2R) on a guided tour of the Roofings Ltd factory. According to the Central Bank, business confidence remains positive, and private sector activity is demonstrating steady momentum.


The Monetary Policy Committee of the Bank of Uganda has decided to keep the Central Bank interest rate at 9.75% for May.

The decision highlights the Central bank's strong focus on keeping people's expectations about future price increases stable and supporting a strong and long-lasting economic path for the country, even with the current unpredictable global economic outlook.

Dr. Michael Atingi-Ego, the BoU Governor, told journalists at a briefing on Tuesday that the current monetary policy stance remains optimally calibrated to navigate prevailing economic headwinds.

  • He emphasized its suitability for maintaining inflation within the targeted range, thereby creating a stable macroeconomic environment conducive to long-term socio-economic transformation.

"The Monetary Policy Committee (MPC) has determined that the existing policy framework is best positioned to ensure inflation remains aligned with our objectives, while simultaneously supporting robust economic expansion and the nation's broader development agenda," stated Atingi-Ego.

Since 2011, Uganda has been using a specific method called "inflation targeting" to manage how fast prices go up. This approach has clearly helped the country to keep price increases under control, which in turn has supported economic growth and the development of its financial system.

  • Recent information from April 2025 shows that the general inflation rate was 3.5%, and the core inflation rate (which excludes some unstable prices) was 3.9%. These are slightly higher than they were in the previous month.

Looking forward, the Bank of Uganda expects the core inflation rate to be around 4.5% to 5.0% in the next financial year that starts in June, which is close to its long-term goal of 5%.

However, the Central bank remains acutely aware of potential upward risks to inflation. Atingi-Ego highlighted escalating domestic demand, fuelled by strategic investments in Uganda's burgeoning oil and gas sector, ongoing global supply chain vulnerabilities, regional geopolitical complexities, and the impact of unpredictable weather patterns on agricultural output as key factors warranting close monitoring.

Furthermore, exchange rate fluctuations stemming from global financial uncertainties present a potential pathway for increased import costs, thereby adding further inflationary pressure. Counterbalancing these risks, the BoU anticipates that improved agricultural yields, a strengthened exchange rate underpinned by capital inflows into the oil sector, and a moderation in global energy and commodity prices could exert downward pressure on inflation.

Despite the complexities of the global economic environment, Uganda's economic fundamentals exhibit notable resilience. Business confidence remains positive, and private sector activity demonstrates steady momentum. Nevertheless, the BoU adopts a cautious outlook, acknowledging potential downside risks such as subdued external demand, tightening global financial conditions, and policy uncertainties that could potentially temper future growth prospects.

  • Fred Muhumuza (PhD), a senior economist and lecturer at Makerere University, commended the BoU's prudent decision, emphasizing the predictability it offers to both businesses and consumers.
  • "Maintaining the CBR at 9.75% reflects a judicious balancing act by the BoU, acknowledging the imperative of inflation control alongside the need to nurture economic growth. In the current climate, characterized by global instability and significant investments in the oil sector, introducing further monetary adjustments would be imprudent," Muhumuza observed.

He further noted the potential for sustained medium-term growth driven by oil and gas investments but cautioned against the resurgence of domestic inflation without diligent oversight.

Diana Kibuuka, Head of Research and Market Development at Equity Bank Uganda, also welcomed the decision, saying the consistent rate allows financial institutions to maintain established loan pricing structures, a crucial element for effective credit planning and fostering customer confidence.

"For financial institutions, the stability of the CBR enhances our ability to forecast accurately and continue providing vital support to key sectors such as agriculture, manufacturing, and SMEs. However, we remain vigilant for any unforeseen policy shifts that could impact interest margins or asset quality," Kibuuka stated.

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